I have few LIC policies running & after doing a detailed analysis, I have to conclusion that some of the funds are better to surrender immidiately as I don’t see any long term gain from there, where as if I surrender now, I can invest that money from henceforth in other areas.

Now, when I am calculating my surrender value, obviously there is a loss & most of these policies have been started since last 3-4 years with a maturity period of 20/25 years (i.e. still 16/20 years from now).One of them is Jeevan Saaral. My questions are

1. I have understood if the policy is near to maturity, then it is better to do paid-up than surrender. is this right understanding?

2. I have also read in some other posts, where Manish had suggested someone to stop the LIC premium, make it a paid-up & start investing the same amount in better return instruments. Now, my questions what is the benefit of making a policy paid up. If i have term over, then making that policy paid up will only keep my money engaged without any return, no return benefit, no loyalty additon nothing. Only the same money will be returned to me if I survive after maturity. Whereas if i surrender now, even if i incur losses(for my own policy, I paid premium 1.5L till now & my surrender return value is ~80-90K, i.e. present loss=60K), but that 80-90K invested even in FD, post tax will give me return in next 15 years which will cover my losses.

So, i think surrender is always a better option that paid-up. Can someone please share their thoughts here.

Thanks.

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4 replies on this article “LIC Policy – Surrender or Paidup”

Dear Mustafizur, please Surrender now. I, dear Manish or others are trying to help each one of you. At the end of the day, before arriving to any conclusion, it’s our duty to check & cross check all the things. 🙂

1. I have understood if the policy is near to maturity, then it is better to do paid-up than surrender. is this right understanding?
Yes, the logic is simple, to recover your loss from surrender, you need time. If time is not there (actually less time as the policy is about to complete), making it paid up is a suitable option.

2. I have also read in some other posts, where Manish had suggested someone to stop the LIC premium, make it a paid-up & start investing the same amount in better return instruments. Now, my questions what is the benefit of making a policy paid up. If i have term cover, then making that policy paid up will only keep my money engaged without any return, no return benefit, no loyalty additon nothing. Only the same money will be returned to me if I survive after maturity. Whereas if i surrender now, even if i incur losses(for my own policy, I paid premium 1.5L till now & my surrender return value is ~80-90K, i.e. present loss=60K), but that 80-90K invested even in FD, post tax will give me return in next 15 years which will cover my losses.
This answer (given by dear Manish) depends on case to case basis & can not be generalized.

Yeah that’s right, Manish’s suggestion obviously had its own context. But you know how much regard people have for Manish & when he said something which was not matching with my calculation, I was confused :(. Pardon me for that. Let me give you the details & then probably you can share your thought.

I have one Jeevan Saral running from 2010 with MSA ~15L with yearly premium ~48K. I have already paid 3 premium.

If i surrender now, my loss ~64K(3 premium paid-surrender value, surrender value=80%of MSA for 3 term)
If i surrender after 5 years, my loss ~55K(as surrender value here is 100% of MSA for 5 term
If i surrender after 16 years, no loss as that time my surrender value outweighs the total premium paid till that time.

Hence, I feel I should surrender it immediately. Just want to have a second opinion from people like you/Manish.